Buy This Top Largecap Multibagger Technology Stock, Offering 4.40% Dividend Yield: KR Choksey

Tech Mahindra Limited. is one of the top technology stocks in India. Brokerage firm KR Choksey has given a buy rating to this stock for high upside. Giving around 115% returns to the shareholders in the past 5 years, it became a leading Nifty multibagger stock.

Stock To Buy: Target Price

The Current Market Price (CMP) of Tech Mahindra Limited. is around Rs. 1,002. KR Choksey has estimated a Target Price for the stock at Rs. 1,181. This stock has the potential to give a 17.6% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 99,636 crore. The stock is now offering a 4.40% dividend yield.

Stock Outlook
Current Market Price (CMP)	Rs. 1,002
Target Price	Rs. 1,181
Potential 1 year return	17.60%
52 week high share price	Rs. 1,838
52 week low share price	Rs. 943.70

Margins to improve

In Q1FY23, its EBITM stood at 11%, and declined by 220bps QoQ due to a partial wage revision, lower utilization, and a normalization in SG&A spend. TechM has guided for 100-150 bps EBIT margin increase to 12-12.5% in Q2FY22E. In spite of lower headwind from visa costs & removal of Comviva seasonality, benefit from rising contract pricing and higher utilization rate are likely to aid the margin.

Communication and enterprise businesses

Technology/retail/manufacturing verticals registered healthy growth of +6.3/+5.7/+4.3% QoQ, while BFSI declined by -2.7% QoQ due to currency headwind. Americas grew 4% QoQ while Europe grew 3.9% in CC. Revenue from top 5 declined 5.8% QoQ in dollar terms. Top 10-20 barely grew at 0.6% QoQ because many clients (from Non-US geos) were impacted by the cross-currency headwinds. Growth was primarily driven by smaller accounts. BPO grew 2%/28.7% QoQ/YoY in USD terms, comfortably outgrowing IT services (1.4%/16.5% QoQ/YoY).

Stock Valuation

Giving a buy rating to KR Choksey mentioned, "We have assigned a P/E multiple of 15.5x to the FY24E estimated EPS of Rs. 76.2 to arrive at a target price of Rs. 1,181, with an upside of 17.6%. Accordingly, we maintain our rating to a buy to the stock."

Company Portfolio

Tech Mahindra (TechM) is an Indian multinational corporation, specializing in technology-based transformation. The company showed prowess in Network Services, Engineering Services, Platform based solution, Security, Digital Marketing, CX, BPS, IT and robust innovation strategy for driving innovation culture. With over 1,21,000 employees across above 90 countries, company is serving the needs of above 1,000 clients including several Fortune 500 companies.

Disclaimer

The above stock was picked from the brokerage report of KR Choksey. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.